A pseudonymous blog about Canadian law and politics.
This blog should not be relied on as legal advice.

Wednesday, July 16, 2014

Hobby Lobby: Yes, corporations can have religious beliefs. No, those beliefs aren't necessarily the beliefs of the shareholders.

The Supreme Court of the United States may be a politicized out-of-touch super-legislature, but it sure knows how to troll the blogosphere. In June, it released two abortion-related decisions. The first was boringly unanimous. But the second, Hobby Lobby, once again proved that abortion is an intimate decision between a woman, her doctor, talk-show hosts, and bumper-sticker manufacturers.

99% of Internet commentary on Hobby Lobby is ill-informed tribalist crap, but the case raises genuinely interesting issues. The story is that back in 1990, a conservative Supreme Court held that the free exercise clause of the First Amendment does not give rise to a constitutional right of accommodation for religious minorities whose practices are affected by general laws with secular motivations. That's the rule the bad reactionary people in Quebec want now. It means that believers in traditional American Indian religions cannot take ritual peyote, and, to take the Canadian example that went the other way, observant Sikhs can't work on construction sites if the only headgear permitted is a construction helmet,

Nobody in Congress liked that ruling. The religious right didn't like it, because they saw themselves as protecting religious freedom. And liberals didn't like it, because they saw themselves as protecting unpopular religious minorities. So the 1993 Religious Freedom Restoration Act was enacted to near-unanimous support. It required that genuine religious objectors be accommodated when their practices violate general statutes, so long as any compelling purpose of the statute can be met with less restrictive means. It is a compromise. Society can definitely ban human sacrifice, and may be able to tell people to remove their veils to get drivers' licences, but it can't do whatever it wants without a good reason just because it is more convenient for the majority who don't share your wacky cultish belief system.

Under Obamacare, employers are mandated to provide health insurance to their employees. From a progressive perspective, this is a second-best to having the state provide universal health insurance, but for various historical reasons, that is how it had to be. Of course, this could easily be sidestepped if there were no rules about what "health insurance" must cover. So the Affordable Care Act delegates the power to require that certain preventative services be part of the insurance package. Among those services are birth control, and among the methods of birth control are some that many evangelical Christians believe are equivalent to abortion because they prevent a fertilized zygote from implanting. Of course, this happens all the time and no one organizes a funeral, but nobody says your religious views have to make sense to the Pithlord, who has been known to wonder whether the Athanasian creed is completely down with the law of non-contradiction.

Hobby Lobby is a successful arts-and-crafts chain with a fair number of employees. Its shares are held by the Green family, all of whom are committed evangelical Protestants and believe that "morning-after" contraception is abortion and therefore wrong. We don't know what its employees think.

The five conservative justices held that requiring Hobby Lobby to provide insurance that includes morning-after birth control to its employees violates the corporation's sincere religious belief under RFRA and that in light of a number of accommodations given to churches and religious non-profit organizations (who are themselves legally corporations), the mandate cannot be imposed on it.

Interestingly, only two of the liberal dissenters objected to the first step in the analysis, which was that Hobby Lobby could have religious beliefs, and it makes sense to attribute to it the religious beliefs of its shareholders. Personally, I think that is the most interesting issue, since the accommodations do seem to create a huge problem for the government's assertion that Obamacare would fall apart if Hobby Lobby does not have to include the morning after pill in its insurance coverage.

This ought to be a hard case for liberals, which makes Ginsburg's rhetoric and much of the rhetoric in the feminist and liberal blogosphere a bit disturbing. However, some on the right don't even see why it should be hard. Liberals don't take the legal fiction of a distinct corporate person very seriously in other contexts. So why not agree that if the law requires a corporation to do something, this is logically the same as requiring its shareholders to do it? Even a libertarian as fair-minded as Julian Sanchez doesn't really get it.

Who is the firm?
Legally, a corporation is a person who is not an individual. Alito, for the conservatives, points this out. Since we widely acknowledge that religious colleges or hospitals have religious beliefs, Alito argues that the difference between 'for profit" corporation and a "not-for-profit" one is arbitrary. Kosher butcher shops come up.

Some corporations, though, are also the legal embodiment of a firm or business. A firm is not a legal fiction. It is a tribe, or community, or team. The corporation in a legal sense is a useful organizing device to bring together investors and employees. Either investors or employees might prefer to take their compensation as fixed claimants on the value produced by the firm or as residual claimants. Generally speaking, it is economically more efficient for a subset of investors (equity investors) to take their compensation as residual claimants because investors are better able to diversify risk that the firm will fail. But employees have more control over whether it will succeed, so this is not always the case. In practice, employees get some of their de facto compensation as residual claimants too, if only in the sense that job security and satisfaction is better when the firm is doing well.

Progressives differ from libertarians about workplace issues precisely because they are sensitive to the ways in which the firm is both a tribe, and a hierarchical tribe. Sure, when negotiating to enter the firm as an employee, the individual is free to do so or not depending on what is in their advantage. But once inside, the potential for mobility is less, and anyway the employee becomes part of an already-existing social structure that has norms of deference and of reciprocity. As Marx put it (anticipating Coase), inside the firm we leave the sphere of market freedom for the sphere of authority.

The consumption of labour-power is completed, as in the case of every other commodity, outside the limits of the market or of the sphere of circulation. Accompanied by Mr. Moneybags and by the possessor of labour-power, we therefore take leave for a time of this noisy sphere, where everything takes place on the surface and in view of all men, and follow them both into the hidden abode of production, on whose threshold there stares us in the face “No admittance except on business.” [....]

This sphere that we are deserting, within whose boundaries the sale and purchase of labour-power goes on, is in fact a very Eden of the innate rights of man. There alone rule Freedom, Equality, Property and Bentham. Freedom, because both buyer and seller of a commodity, say of labour-power, are constrained only by their own free will. They contract as free agents, and the agreement they come to, is but the form in which they give legal expression to their common will. Equality, because each enters into relation with the other, as with a simple owner of commodities, and they exchange equivalent for equivalent. Property, because each disposes only of what is his own. And Bentham, because each looks only to himself. The only force that brings them together and puts them in relation with each other, is the selfishness, the gain and the private interests of each. Each looks to himself only, and no one troubles himself about the rest, and just because they do so, do they all, in accordance with the pre-established harmony of things, or under the auspices of an all-shrewd providence, work together to their mutual advantage, for the common weal and in the interest of all.

On leaving this sphere of simple circulation or of exchange of commodities, which furnishes the “Free-trader Vulgaris” with his views and ideas, and with the standard by which he judges a society based on capital and wages, we think we can perceive a change in the physiognomy of our dramatis personae. He, who before was the money-owner, now strides in front as capitalist; the possessor of labour-power follows as his labourer. The one with an air of importance, smirking, intent on business; the other, timid and holding back, like one who is bringing his own hide to market and has nothing to expect but — a hiding.

Social democrats and progressive liberals disagree with Marx that the wage labour relation is inherently exploitative. But they do agree that it is potentially so, and that the freedom of the employee to quit or never apply for a job in the first place does not fully answer Marx's point. On this, I think their intuition is the intuition of most people in democracies, including even the United States, and is backed up by the transaction cost economics that gives a better picture of industrial organization than Marx was capable of.

On the social-democratic view, the right of shareholders to a residual claim on the surplus of the firm is just one part of a complex social contract. It is legitimized (to the extent that it is) by corresponding rights and expectations in the workforce. In the United States, this critically includes a right to employer-paid health care. Of course, as an economic matter, this is part of total compensation and therefore reduces the amount of take-home wage the employee would otherwise get. So it is even more, a right of the employee.

Once seen as a right of an employee -- at least an employee in an enterprise that is not itself religious -- the question of religious freedom seems very different. No liberal has an objection to an employee who thinks the morning after pill is murder refusing to use the coverage. So the issue only comes up when the employee thinks she needs it, and does not believe that God has forbidden it (or, perhaps, has decided to act contrary to what she thinks is God's will -- itself a religious act). In that situation, it seems that the Greens are interfering with her exercise of conscience because they are taking from her (in this one area) a right that American society has considered belongs to the employee.

In short, for the purposes of exercising options on medical insurance, the corporation is the employee, and not the shareholder. So for that purpose, in the only case that would matter, Hobby Lobby Inc. either disbelieves or accepts the divine wrath associated with post-fertilization pre-implantation birth control. The shareholders have no more right to interfere with that decision than the government.